WASHINGTON (October 1, 2004)  Top political officials at the U.S. Environmental Protection Agency (EPA) relaxed air pollution rules in 2002, benefiting utility industry defendants in ongoing Clean Air Act enforcement suits brought by the EPA. That is the conclusion of a long-awaited report issued today by the EPA's inspector general.

"The Bush administration pretended it was going after big energy companies for illegal air pollution but all the while it was undermining the government's suits against the polluters," said John Walke, director of the Clean Air Project at NRDC (Natural Resources Defense Council). "This report confirms that top political officials at the agency charged with protecting public health had to have known that they were letting power plants off the hook for pollution that shortens lives and triggers asthma attacks."

Key findings in the inspector general's report include the following:

"The NSR rule change has seriously hampered EPA settlement activities, existing enforcement cases, and the development of future cases." (cover memo p.1)
"No new enforcement actions have been taken against coal-fired utilities alleged to have violated the old NSR rule due to the new rule's adverse impact on [EPA enforcement's] leverage in settlement or court remedies." (report p. iii)
"In contrast to [the EPA Office of Air and Radiation's] view that the 20 percent threshold [for the new exemption from NSR] would not impact enforcement, key [EPA] enforcement officials informed [the inspector general] that the exemption threshold for utilities should be no higher than 0.75 percent." (report p. ii)
"The loophole that this administration has carved into the heart of the Clean Air Act is 20 times the size of what EPA's enforcement experts determined would harm public health and the environment," said Walke.

The inspector general's report recommends that:

"The EPA Administrator, through the reconsideration process of the NSR rule, specifically address the impact on enforcement activities as it relates to coal-fired electric utilities that specifically considers and takes public comment on the resulting environmental impacts of a definition of routine maintenance at any threshold above the desired [EPA enforcement] threshold of 0.75 percent for coal-fired electric utilities." (report p. iii)

Walke added, "Not surprisingly, the EPA inspector general wants the agency to honestly address the harmful impacts of this giveaway to polluters."

Background

On July 16, 2002, the EPA assistant administrator for air and radiation, Jeffrey Holmstead, testified before a joint Senate hearing of the Judiciary and Environment and Public Works Committees regarding changes that his agency had proposed to the Clean Air Act's "new source review" (NSR) provisions. The NSR provisions require large industrial polluters, such as coal-fired power plants and oil refineries, to adopt modern pollution controls whenever they upgrade and increase air pollution. The rule changes announced by the EPA the previous month promised to exempt most pollution-increasing upgrades from federal cleanup requirements.

At the hearing, Senator Patrick Leahy asked Holmstead whether EPA enforcement staff had advised him that the proposal would undercut the federal government's ongoing prosecutions of dozens of coal-fired power plants for violating those same rules. In response, Holmstead testified, "I have been informed by [EPA's] enforcement folks as well as by people in Mr. Sansonetti's office [in the Justice Department] that they do not believe these [changes] will have a negative impact on the enforcement cases.1 Later, another agency official repeated Holmstead's assurance in a written communication to the chairman of the Senate Environment and Public Works Committee.2

On October 22, 2003, however, the General Accounting Office concluded in a report that when the EPA announced its NSR rule changes in June 2002, the agency's enforcement officials actually were convinced that the changes would negatively impact the ongoing enforcement cases.3 Subsequently, two recently departed top EPA enforcement officials publicly revealed that they had conveyed their concerns directly to Holmstead prior to his Senate testimony.4 In reaction, Senators Leahy and Jim Jeffords called upon EPA's inspector general to investigate Mr. Holmstead's statements and the effect of the NSR rule changes on the enforcement cases. Today's IG report is the result of that investigation.

Three of the energy company defendants (SIGECO, Illinois Power/Dynegy, and Ohio Edison) have already relied on the EPA's weakened rules in defending against the agency's enforcement suits.5

Sources

1. Transcript of Joint Hearing before the Committee on Environment and Public Works and the Committee on the Judiciary, United States Senate, "New Source Review Policy, Regulations, and Enforcement Activities," 107th Cong., 2d Sess., July 16, 2002, at 34.
2. Letter from J. Suarez, Assistant Administrator, Office of Enforcement and Compliance Assurance (OECA), Environmental Protection Agency (EPA), to Senator Jim Jeffords, August 23, 2002.
3. General Accounting Office, "Clean Air Act: New Source Review Revisions Could Affect Utility Enforcement Cases and Public Access to Emissions Data," October 2003, at 17; see also Letter from Environmental Organizations to Senators Hatch, Leahy, Inhofe, and Jeffords, October 27, 2003, at 2.
4. Darren Samuelsohn, "Bush's NSR Reforms Harming Enforcement Cases, Former EPA Official Says," Environment & Energy Daily, February 29, 2004; Eric Pianin, "Ex-EPA Officials Question Clean Air Suits: Assistant Administrator Disputes That He Misled Congress About Effect of Rules," Washington Post, October 10, 2003.
5. SIGECO's Notice of Supplemental Authority on Fair Notice and Routine Maintenance in U.S. v. SIGECO, S.D. Indiana Civil Action No. 99-1692 (Jan. 8, 2003), at 2-4; Expert Report of Richard E. Krause, filed on behalf of defendants Ohio Edison Company and Pennsylvania Power Company in United States v. Ohio Edison, S.D. Ohio Civil Action No. 99-1181 (Mar. 1, 2004); Chart displayed to the U.S. District Court for the Southern District of Illinois on September 29, 2003 by counsel for the defendant in U.S. v. Illinois Power Co., S.D. Ill. Civil Action No. 99-333.

The Natural Resources Defense Council is a national, nonprofit organization of scientists, lawyers and environmental specialists dedicated to protecting public health and the environment. Founded in 1970, NRDC has more than 1 million members and e-activists nationwide, served from offices in New York, Washington, Santa Monica and San Francisco.